The Exchanges

The most recognized stock exchange in the world is the New York Stock Exchange or the NYSE.   There  are,  however, many exchanges  throughout  the United  States that  all operate in a similar manner. Exchanges are dual auction markets. They provide a central marketplace where buyers and sellers come together in one centralized location to compete with one another. Buyers compete with other buyers to be the highest price anyone is willing to pay for the security, and sellers compete with other sellers to be the lowest price at which anyone is willing to sell a security. All transactions in an exchange- listed security that are executed on the exchange have to take place in front of the “specialist / DMM” for that security. The specialist / DMM is an exchange member who is the designated market maker in that security and is responsible for maintaining  a  fair  and  orderly  market  for  the  stock  in  which  they  specialize.  The Specialist / DMM stands at the trading “post” where all the buyers and sellers must go to conduct business in the security. This is responsible for the “crowd” that you see on the news and financial reports when they show the floor of the exchange. All securities that trade on an exchange are known as listed securities.

THE DMM ACTING AS A PRINCIPAL

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